July 29, 2018 Arbitration - Orders
Claim No. ARB-004-2016
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR DAVID STEEL
Claimant / Applicant
DUBAI WATERFRONT LLC
Defendant / Respondent
ORDER WITH REASONS OF JUSTICE SIR DAVID STEEL
UPON reviewing the Claimant’s Application dated 5 November 2017 seeking a vacation of the administrative stay imposed by Chief Justice Michael Hwang of 30 January 2017 on DIFC Courts recognition and enforcement proceedings in relation to the Order for Recognition dated 10 May 2016;
UPON reviewing the Defendant’s Application dated 31 May 2016;
UPON hearing counsel for the Claimant at a hearing dated 9 July 2018;
AND UPON reviewing all relevant material in the case file;
IT IS HEREBY ORDERED THAT:
1. The Claimant’s Application dated 5 November 2017 is granted.
2. The Defendant’s Application dated 31 May 2016 is dismissed.
3. The Order for Recognition dated 10 May 2016 is reinstated.
4. The Defendant shall pay the Claimant’s costs of AED 309,192.00.
Ayesha Bin Kalban
Date of Issue: 29 July 2018
SCHEDULE OF REASONS
1. These proceedings have a long and unfortunate history. Furthermore the present application raises some important issues with regard to the impact of rulings by the tribunal appointed under Decree 19 of 2016 (“the Decree”) on the formation of the Judicial Council of Dubai Courts and Dubai International Financial Centre Courts (“the Joint Judicial Committee”). In the circumstances, despite the fact that the matters at issue arise out of arbitration proceedings, I consider that this judgment is of major legal interest and I direct that reports of the judgment may be published pursuant to RDC 43.42.
2. The relevant arbitration award was issued under the auspices of the Dubai International Arbitration Centre (“DIAC”) as long ago as 11 November 2015 (“the Award”). The dispute concerns the purchase by the Claimant of property situated in the Dubai Waterfront development from the Defendants. In May 2008 the Claimant paid a deposit of AED 180,490,000 amounting to 10% of the purchase price of the property. In the face of extensive delays in construction the Claimant terminated the SPA in September 2011 which the Defendant refused to accept. The arbitrator in the DIAC arbitration found that the Claimant had lawfully terminated the SPA and that the Defendants were required to repay the deposit together with interest at 9% from September 2011.
3. On 22 March 2016, the Claimant issued a claim form in the DIFC Courts seeking recognition and enforcement of the Award in the DIFC in the amount of AED 270,110.70 (about $75,000) together with costs of AED 65,000 (about $17,500). The application was made ex parte pursuant to RDC 43.62 supported by a statement of Mr. Syed Mujtaba Hussein. The application was expressly reliant on Articles 42 and 43 of the DIFC Arbitration Law of 2008.
4. The DIFC Courts duly made the order sought on 10 May 2016. It was subject to the Defendant’s express right to apply to set aside the order within 14 days of service. On 31 May 2016 the Defendant issued an application to set aside the order or alternatively an order for an adjournment pending the outcome of any application to annul the Award to be made in the Dubai Courts. The substantive grounds for setting aside were that the Court had no jurisdiction because Articles 42 and 43 did not apply to an Award from outside the DIFC, and/or that there was no valid arbitration agreement because the arbitration agreement had not been signed on the Defendant’s behalf by someone who had authority to do so. It was further contended that the Claimant had failed to make full and frank disclosure to the Court.
5. On 5 June the Defendant issued an application before the Dubai Courts seeking to annul the Award on the grounds of the lack of authority of the signatory on behalf of the Defendants to sign the arbitration agreement (in contrast to the SPA itself) and on the grounds that the SPA was not registered on the Interim Property Register.
6. On 9 June 2016, the Decree came into force and on 20 July 2016, the Defendant filed an application before the Joint Judicial Committee seeking a ruling on the asserted consequent conflict of jurisdiction.
7. On 9 August 2016, the Defendant filed an application in DIFC Courts seeking a stay of the proceedings pursuant to Article 5 of the Decree. In the response dated 23 August 2016, the Claimant drew attention to the fact that the Decree had not been published and accordingly a copy was not available from the Supreme Legislation Committee, and no filing or registration number had been issued by or on behalf of the Joint Judicial Committee. It was further denied that any conflict of jurisdiction had arisen.
8. In fact, the application challenged the jurisdiction of the DIFC Courts by virtue of the repeated assertion that Articles 42 and 43 of the Arbitration Law did not apply to DIAC awards. Further, on the assumption that there was jurisdiction on the part of the DIFC Courts, there was the further submission that the Joint Judicial Committee stay both the case in the DIFC Courts and in the Dubai Courts.
9. On 6 September 2016 following an oral hearing the DIFC Courts delivered a judgment on the Defendants application for a stay. The judgment recognised the fact that the DIFC Courts had no jurisdiction to annul the Award but had exclusive jurisdiction to consider enforcement in the DIFC. Having made the point that the proposition that Articles 42 and 43 were not applicable was not arguable (given the decision of the Court of Appeal in Meydan Group LLC v. Banyan Tree Corporate Pte Ltd CA-005-2014), the judgment went on:
25. In fact, it is difficult to see how it can be said that there is a relevant dispute under Article 4. The engagement of Article 4 as I have already recorded requires a dispute over jurisdiction between the Dubai Courts and the DIFC Courts ie a dispute between the courts not a dispute between the parties. Neither court has rejected the claim or refused to hear it. Nor are there any contradictory judgments. As presently advised it is difficult to see how the jurisdictional dispute could arise given that there is no difficulty in the Dubai Court considering the validity of the award and the DIFC Courts being requested to enforce the award in the DIFC subject to the implications if any of the possibility of the award being set aside in Dubai.
10. Having made the additional points that it was unclear whether a stay had been in place under the terms of the Decree absent registration with the Joint Judicial Committee and payment of any requisite fee and whether, assuming a stay, it had outlived the passage of more than 30 days being the time limit imposed by the decree, the stay was refused. Indeed it was not until 29 September 2016 that the DIFC Courts were notified of a stay order apparently issued on 21 August 2016 by the Joint Judicial Committee staying both sets of proceedings pending determination by the Joint Judicial Committee of the competent court.
11. On 14 November 2016, the Dubai Court of First Instance dismissed the Defendants’ application to annul the Award on the grounds of res judicata. The Defendants appealed.
12. On 19 December 2016, the Joint Judicial Committee handed down a ruling (by a majority) to the following effect (in translation):
a. The case is to be remitted for trial by Dubai Courts
b. DIFC Courts should cease from entertaining the case.
13. The rationale for this conclusion was:
a. There was a dispute regarding jurisdiction since there were two cases filed in two courts.
b. The Decree required the tribunal to decide which of the two courts had jurisdiction ‘to enforce or annul’ the Award.
c. The New York Convention did not apply.
d. The Dubai Courts were the competent courts pursuant to the general principles of law embodied in the procedural laws.
14. The dissenting minority simply stated as follows:
a. At all stages it has been accepted by the DIFC Courts (“DIFCC”) that the courts of the arbitral seat are the Dubai Courts and that only Dubai Courts have jurisdiction to annul the award.
b. The DIFCC has compulsory and exclusive jurisdiction to entertain an application for recognition and enforcement within the DIFC.
c. There are therefore two competent courts to decide this case, each court deciding the matters concerning this case within its jurisdiction according to the relevant laws governing its jurisdiction.
d. Each Court is therefore free to deal with the pending applications before it in accordance with the laws applicable to such applications.
15. In the wake of the Joint Judicial Committee majority ruling the DIFC Courts issued an administrative stay on 30 January 2017 whereby further proceedings in the Claimant’s recognition and enforcement action were put on hold until further notice.
16. On 30 March 2017, the Dubai Court of Appeal reversed the Court of First Instance’s conclusion based on res judicata principles, but dismissed the Defendant’s appeal nonetheless on the merits. The challenge as regarded authority failed on the grounds that:
“…. executing the contracts shall be governed by good faith and shall comply with the standards set forth in Article 70 of the Civil Transaction Law stipulating that no person may resile from what he has (conclusively) performed and no litigant may submit evidence he creates for proving its allegation against third parties.”
17. As regarded the failure to register the SPA, such complaint was rejected in the judgment of the Dubai Court of Appeal given that the point had not been raised in the arbitration.
18. A further appeal to the Courts of Cassation was filed on 16 May 2017. The judgment of the Court of Cassation dismissing the appeal and affirming the decision of the Court of Appeal was handed down on 11 October 2017.
19. On 5 November 2017, the Claimant filed their present application in the DIFC Courts seeking an order:
a. revoking the administrative stay imposed by the Chief Justice on 30 January 2017;
b. dismissing the Defendant’s challenge to the recognition order dated 31 May 2016; and
c. reinstating the Order of the DIFC Courts granting recognition dated 10 May 2016.
20. The Defendant commented on the application by letter dated 5 November 2017. Having quoted the Joint Judicial Committee’s ruling that the DIFC Courts should “cease from entertaining the case” it was submitted that the DIFC Courts had no jurisdiction to entertain the application.
21. Following further correspondence from the Claimant requesting a listing of the application, on 1 March 2018 the DIFC Courts requested submission from the parties on the listing of the administrative stay and the status of the DIFC proceedings.
22. The Claimant served extensive submissions on 15 March 2018, much of which are helpfully repeated in the skeleton argument filed for the present hearing. It was contended that there was no basis for continuing the stay as the Joint Judicial Committee had not (and could not) direct the DIFC Courts to terminate the recognition proceedings which should be reinstated. If the recognition proceedings were reinstated, the Court, it was contended, should dismiss all grounds advanced by the Defendant to challenge recognition and enforcement.
23. The Defendant wrote the same day refusing to further participate in the DIFC Courts proceedings on the grounds that the Joint Judicial Committee had decided that the DIFC Courts had no jurisdiction to hear and determine the case, which included the Claimant’s present application dated 5 November 2017.
24. The administrative stay was lifted by the DIFC Courts on 20 May 2018. A hearing in regard to the outstanding issues was fixed for 9 July 2018. The Defendants reiterated the position that the DIFC Courts had no jurisdiction and thus refused to participate.
25. The threshold question that arises is whether the Joint Judicial Committee has allocated all jurisdiction in respect of the dispute to the Dubai Courts and consistent with that has directed the DIFC Courts to terminate the proceedings. If such for the Joint Judicial Committee’s ruling, the question then arises as to whether it had any jurisdiction to do so (or whether the DIFC Courts should heed the ruling).
26. The terms of the Joint Judicial Committee’s order of 19 December 2016 are clear enough:
“DIFC Courts should cease from entertaining the case.”
27. On the face of it this is a direction in regard to the entire claim for recognition and enforcement and not just the question of the annulment of the Award. This is consistent with the summary of reasons on page 5 of the ruling:
“Pursuant to Section 4 of the Decree No. 19/2016 this dispute should be resolved by deciding which of the two courts has jurisdiction to enforce or annul the enforcement award. In this domestic arbitration we need not and should not refer to the New York Convention 1958 which governs foreign arbitral awards sought to be enforced in different states or jurisdictions.”
28. If this be right the ruling appears to have the purported effect of eliminating the present Award from the provisions of Articles 42 and 43 of the Arbitration Law. All issues both of validity and enforcement are to be allocated to the Dubai Courts. As regards validity there is (and has been) no dispute. But once as here the Award is declared valid by the Dubai Courts the different question arises as to whether recognition and enforcement must also be pursued through the Dubai Courts.
29. Though not spelt out, it would appear to be the Defendant’s position that the Joint Judicial Committee’s ruling eliminates the DIFC Courts’s jurisdiction to hear and determine the application for recognition within the DIFC which had been stayed.
30. If this is correct, it certainly gives rise to difficulties:
a. Even if the Dubai Courts make an order recognising the Award and the Claimant sought to enforce that order within the DIFC, the DIFC Courts would have no jurisdiction to entertain such an application. In short, the Award (indeed any Dubai Award the subject of a similar ruling) would be rendered unenforceable within the DIFC even by way of recognition of a Dubai Court judgment despite the fact that otherwise the DIFC Courts would have exclusive jurisdiction.
b. Put another way, the logic of the Defendants’ analysis of the Joint Judicial Committee’s approach is that recognition and enforcement on the one hand, and setting aside on the other, are both part of the same process. Thus the impact of the Decree is that, once the Joint Judicial Committee decides on the appropriate court to have jurisdiction, there is no room for the other court to make any order whatsoever in relation to the global dispute in any of its aspects. This would lead to a black hole where it would be impossible to recognise and enforce an Award upheld by Dubai Courts within the DIFC, since there is no statutory mechanism for Dubai Courts to directly issue an order for enforcement of an Award within the DIFC save through the DIFC Courts.
c. The express side-lining of the New York Convention leads to a potential disparity of treatment between domestic and foreign Awards which is difficult to justify in the context of Article 24 of the DIFC Courts Law No. 10 of 2004.
d. The reliance on the alleged “general principles of law” as supporting the Dubai Court’s competence to entertain the case is difficult to reconcile with the allocation of “exclusive jurisdiction” to the DIFC Courts pursuant to Article 5 of the judicial authority law No. 12 of 2004.
31. It is the Claimant’s case that once the administrative stay was lifted it was open to the DIFC Courts to reactivate the original recognition and enforcement application. This proposition leads to a careful study of the terms of the Decree.
32. Notably the Decree starts with a recital of the relevant laws that have been reviewed and in particular Law No. 12 of 2004. That law provides that the DIFC Courts of First Instance has original and exclusive jurisdiction over any claim or actions over which the Courts have jurisdiction in accord with DIFC laws. Article 24 (1) of DIFC Law No. 10 accords jurisdiction to the DIFC Courts to ratify any recognised arbitral Award or foreign arbitral Award.
33. One the responsibilities and powers of the Joint Judicial Committee under Article 2 is:
“1. Determine the competent court to consider any claim or applications as to which a conflict of jurisdiction may raise between the Dubai Courts and the DIFC Courts.”
34. It is clear from this provision (and Article 4) that the mischief which the Decree is intended to resolve is that of a conflict of jurisdiction. Accordingly by virtue of Article 5, the Joint Judicial Committee should suspend proceedings until the decision determining the competent court is made.
35. On one view there is no risk of conflicting decisions given the careful allocation of jurisdiction under the statutes. The only issue in the present that might have given rise to a conflict of jurisdiction and/or conflicting decisions was that of the validity of the Award. In according jurisdiction to the Dubai Courts on this issue (an outcome which was hardly controversial) the Joint Judicial Committee must be treated as having complied with the requirements of Article 4(3) of the Decree:
“[The Tribunal] adjudicates applications submitted as provided in the Decree in accordance with the legislation in force and the rules on jurisdiction prescribed in this regard.”
36. Accordingly the ruling of the Joint Judicial Committee should not be construed as extending further than resolving the potential conflict but otherwise preserving the jurisdictional provisions applicable to the DIFC Courts. There is nothing in the Decree to suggest that the Joint Judicial Committee has executory power to override the statutory jurisdiction of either court. It follows that once the Court of Cassation had dismissed the Defendant’s appeal and the administrative stay had been lifted, the Claimant was entitled to reactivate the recognition proceedings. I reject the submission that the DIFC Courts had no residual jurisdiction in the matter.
37. As regards the various matters raised by the Defendants in the application to set aside the order for recognition it is sufficient to state as follows:
a. The proposition that Articles 42 and 43 of the DIFC Arbitration Law do not apply because the seat of arbitration was in Dubai is not arguable: see Meydan Group v. Banyan Tree Corp (Supra): Isai v. Isabelle Claim No. Arb-006-2017.
b. The challenge to the validity of the Arbitration agreement and of the Award has been dismissed by the Dubai Court and is res judicata.
c. Even assuming any obligations to make full and frank disclosure upon an ex parte application for recognition and enforcement, there was no failure in that regard. Paragraph A.5 of the statement in support of the application for recognition was true and required no further elaboration.
38. Against this background, I accord to the Claimant’s Application and I order as follows:
a. The Claimant’s Application dated 5 November 2017 is granted.
b. The Respondent’s Application dated 31 May 2016 is dismissed.
c. The Order for Recognition dated 10 May 2016 is reinstated.
d. The Respondent shall pay the Claimant’s costs of AED 309,192.00.
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